Illustrate the steps taken by the Government and Reserve Bank of India to ensure access of credit to MSMEs. Outline a few measures which have initiated a change in this sector.

  • Government and Reserve Bank of India (RBI) have taken several steps to ensure access of credit to MSMEs.
  • These inter-alia, include, advice to all Scheduled Commercial Banks (SCBs) to achieve a 20% year-on-year growth in credit to Micro and Small Enterprises (MSEs), allocation of 60% of the MSEs advances to the micro enterprise accounts, a 10% annual growth in number of micro enterprise accounts, additional working capital limit to meet the requirements arising due to unforeseen/seasonal increase in demand
  • Adoption of one cluster, operationalising at least one specialised MSME Branch in every district, simplified computation of working capital of MSE units to make it minimum 20% of the projected annual turnover of the unit for borrowal limits upto Rs.5 crore, setting up of Trade Receivables Discounting System (TReDS) to solve the problem of delayed payment of MSMEs, etc.
  • Loans to MSMEs are extended by individual banks on commercial basis as per their Board approved loan policy and extant RBI guidelines in this regard.

1 crore within 59 minutes from PSBs

  • An online lending portal with majority ownership of 6 Public Sector Banks (PSBs)/ Financial Institutions (FIs) along with their associated companies, has been launched which facilitates in principle approval for loans to Micro Small and Medium Enterprises (MSMEs) upto Rs.1 crore within 59 minutes from PSBs.
  • Key features of the portal, inter-alia include enabling borrowers to connect with multiple banks without visiting the branch, financial technology (FinTech) based architecture with high level of information security, analysis of data from various data points, loan products in line with scoring models and assessment methods within approved credit policies, prima facie eligibility check for credit guarantee from CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises), etc.